FOR IMMEDIATE RELEASE
July 30th, 2018
The Monday Morning Quarterback
A quick analysis of important economic data released over the last week
The economy is now growing at a rate that suggests a 3% plus year over year growth rate for 2018. The current rate of inflation as measured by the CPI is just over 2%. Interest rates, both short and long, remain low by historic standards. The unemployment rate is also low. In fact, the last time the economy had these dynamics this late in a cycle was probably 60 plus years ago. This is simply remarkable. Yet, nothing lasts forever. So, enjoy it. And while by almost any measure we are late in the cycle, there is really no sign of any imminent recession. To the contrary, unless something unexpected happens, by this time next year this will have become the longest recovery/expansion in American history.
The music must stop at some point. But, how long it stops for is another question. Not all recessions are the same. And while it’s too early to say what the next one will look like when it gets here, it will most likely be much less severe than the last downturn. None of the excesses that brought us to the precipice of a financial meltdown appear to be with us. Overall, it is quite a turn of events.
Evidence of how the tax cuts are turning out can be found in last Friday’s announcement of 2nd quarter real GDP. During the quarter, real GDP expanded by a whopping (and expected) 4.1% at an annual rate. Businesses obviously liked what it saw in the tax cut as plant and equipment spending both expanded at a rapid rate. Businesses wanted to add plant to both become more efficient and have capacity to meet strong demand. Consumers likewise acted like they were happy as consumer spending grew rapidly as well. Exports also expanded but at least part of this could have been exporters trying to push goods out as fast as possible before the enactment of tariffs. Thus, next quarters numbers are likely to be less ebullient.
Most economists expect GDP this year to come in at or above 3.0%. And while how sustainable this is over the long run is open to debate (there are good demographic reasons to doubt that it is), the economy is doing just fine, thank you. Enjoy the party.
U.S. Snapshot:
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Real GDP increased at an annual rate of 4.1% in the 2nd quarter of 2018. This compares to 2.2% in the 1st quarter (see chart below). The 2nd quarter increase reflected positive contributions from personal consumption expenditures (consumer spending that accounts for about 70% of real GDP), nonresidential fixed investment (spending by business on plants, etc.), exports and government spending. These more than offset negative contributions by private inventory investment, imports and spending on apartments. This is the strongest growth in real GDP in four years.
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Manufacturers’ new orders for durable goods increased 1.0% in June over May and now stand 3.2% over year earlier levels. Non-defense goods excluding aircraft are now 8.3% above a year ago.
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The University of Michigan consumer sentiment index for July checked in at 97.9. This is modestly above expectations. This compares to 98.2 in June and 93.4 a year ago. Thus, consumer confidence remains high.
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The home ownership rate in the U.S. increased slightly in the 2nd quarter to 64.3%. This compares to 64.2% in the 1st quarter and 63.7% a year ago. Five years ago, the rate was 65.0%. Ten years ago, it was 68.1%.
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The rental vacancy rate remained low at 6.8% in the 2nd quarter. That compares to 7.0% in the 1st quarter and 7.3% a year ago.
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Existing home sales decreased for the third straight month in June as supply constraints remained a problem. The ongoing supply/demand imbalance also pushed up median prices for existing homes to record levels. The median price of an existing home as of June was $276,900 compared to $263,300 a year ago.
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New single family home sales in June were at a seasonally adjusted annual rate of 631,000. This compares to 666,000 in May and 616,000 a year ago.
Arizona Snapshot:
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Total air traffic at Phoenix’s Sky Harbor Airport increased a modest 0.2% in June compared to a year ago.
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The state’s home ownership rate in the 2nd quarter stood at 64.9% compared to 64.5% last quarter and 62.6% a year ago.
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The Greater Phoenix home ownership rate stood as 63.8% in the 2nd quarter. Last quarter, the rate stood at 62.8%. A year ago, it was 61.8%.
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According to the Census Bureau, the Greater Tucson home ownership rate was 64.6% in the 2nd quarter compared to 65.4% in the 1st quarter and 59.2% a year ago.
About EDPCo
Elliott D. Pollack & Company (EDPCo) offers a broad range of economic and real estate consulting services backed by one of the most comprehensive databases found in the nation. This information makes it possible for the firm to conduct economic forecasting, develop economic impact studies and prepare demographic analyses and forecasts. Econometric modeling and economic development analysis and planning are also part of our capabilities. EDPCo staff includes professionals with backgrounds in economics, urban planning, financial analysis, real estate development and government. These professionals serve a broad client base of both public and private sector entities that range from school districts and utility companies to law firms and real estate developers.
For more information, contact –
Elliott D. Pollack & company
7505 East Sixth Avenue, Suite 100
Scottsdale, Arizona 85251
480-423-9200
